Prior research has documented a link between perceived neighborhood safety and functional limitations including incident mobility limitation; yet, no research has explored the association between perceived neighborhood safety and recovery from functional limitations. This study investigates whether perceived neighborhood safety independently predicts recovery. Using longitudinal data from the Health and Retirement Study (HRS; 1996–2008), discrete-time event history models with multiple competing events were estimated using multinomial logistic regression. Robust standard errors were used to adjust for clustering. In the unadjusted model, the odds ratio for recovery from mobility limitations was 1.22 (Confidence interval [CI]: [1.17, 1.27]) for respondents reporting greater neighborhood safety, while, in the fully adjusted model, the odds ratio was 1.11 (CI: [1.05, 1.17]). Even after controlling for sociodemographic characteristics and numerous health risk factors, perceived neighborhood safety was a robust predictor of mobility limitation recovery. This research provides further evidence that environmental factors shape functional health outcomes including recovery.